REAL ESTATE |
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area watch: jalandhar
home decor
Green house
Real estate law should cover small projects: Panel
PICK OF THE WEEK
market pulse
REALITY BITES
tax tips
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Beating the slump?
With the sluggish residential segment showing some signs of revival and a slew of major hotel projects on the anvil, the realty scene in Jalandhar seems to be gearing up to shrug off the slowdown Deepkamal Kaur After facing a slump for more than four years, the real estate market Jalandhar seems to be getting back on its feet, albiet slowly. While some movement is being seen in the sale-purchase market, many of the projects that had been in a limbo for the past several years are also being revived with construction activity being resumed. Some new projects have also started coming up. Sukhdev Singh, a local realtor who is coming up with a group housing project and a commercial building in Jalandhar, said that the realty sector seems to have picked up pace in the recent times. “However, the larger picture will be clear after the Lok Sabha polls and after the political parties coming to power announce their new policies”, he added. Construction activity hasbeen resumed in a number of malls and hotel projects that had been launched with much fanfare but had remained “under construction” for over two years. New projects
PUDA has recently announced its group housing scheme at the Old Jail site. According to the plan formally launched by Deputy Chief Minister Sukhbir Badal, there will be 832 flats, including 651 three-bedroom apartments and 181 four-bedroom apartments. The cost of the project coming up in an 18 acre land has been pegged at ~550 crore. But there are feasibility issues including getting permission to have 21-storey high-rise flats from the Airport authorities, a ~400 crore loan taken by the government by pledging this property and response to the self-financing scheme from the residents. The Jalandhar Improvement Trust (JIT), too, has invited applications for its 119 Super Deluxe HIG Flats in its Surya Enclave Extension Scheme. The flats would come up in six-circularly designed towers going upto 10 floors. The last date of application is April 16. While commenting on the residential segment Sukhdev Singh said, “The demand for affordable housing has always been there and will keep on increasing. But with hardly any government schemes coming, the residents have to bank upon the private builders. Since the government has been taking hefty charges from the builders on account of external development charges, the prices of properties go out of reach for a common man” . The MD of Jalandhar-based AGI Infra Ltd. added that the government must pitch in to stablise the real estate market and ensure a planned development in cities.
Slow start for malls
The mall culture, however, has not caught on in this city in spite of its strong NRI connection. Some of the recently started projects have not picked up much in terms of sales, footfalls as well as retail outlets. The PPR group’s City Centre shopping mall on a 3 lakh sq ft site in the heart of the city near BMC Chowk, has only a handfull of shops occupied in the past two years. Its other shopping project PPR Arcade on Kapurthala Road also is so far devoid of any commercial activity. Even the recent auctions conducted by PUDA for the sale of spaces in its new market places, including those in the old SSP office site and old Canal Rest House on Kapurthala Road have so far not seen any response from even a single investor.
Healthy hospitality trend
Compared to malls and group housing projects in the city, it is the hotel projects that are developing at a much faster pace with several new chains set to open by 2015. While the seven-storey Park Plaza Hotel is coming up on Police Lines and is scheduled to start by July next year, Hotel Sarovar Portico, too, is being constructed by the local Vasal group here with facilities including 50 guest rooms and suites, food and beverage outlets, business and fitness centres and a complete wi-fi connectivity. Hotel Welcome Inn and Resorts is coming up at Nakodar Chowk. However, only the basic structure of it complete as yet. The Taj Gateway Hotel and Hotel Days Inn are among others in the pipeline. City-based Makkar Group had recently opened Hotel S1 in Vijay Nagar, a sequel to their Hotel M1 that which was inaugurated about five years back. Having started in August 2011, the Taj Gateway Hotel is likely to get completed within a year’s time. The hotel is being constructed for the group by the Jalandhar-based Lally Group in a six-acre plot near Paragpur at the city’s entrance from Phagwara side on the GT Road. The hotel will have 180 rooms, a banquet with a capacity for 1,500 persons, an outdoor banquet, a spa and a parking provision for 250 cars. Sarabdeep Lally, the owner and the builder of the site, said even the minutest details, including the cutlery to be purchased would be as per the Taj standards. “The group is very particular about its style and wants its customers to have
the same feel in any hotel of the company pan India”, he said. A 48-room Hotel Days Inn is set to open at Jyoti Chowk by the end of this year. The hotel will have the city’s first revolving restaurant Parikrama, as its major attraction. Besides, there will be 60 shops in the same compound with the anchor shop going to Delhi’s famous Nathu Sweets. Rajan Chopra, the owner of the hotel, claimed that the project was coming up in a 4 lakh sq ft site in the heart of the city. “We just hope that the hospitality industry is set to usher in a boom time for the real estate market which had undergone an extremely long rough phase”, he had his fingers crossed. Hotel MBD Krishna on the Jalandhar-Phagwara highway, which has not seen any progress owing to legal tangles for the past nearly five years, too sees a glimmer of hope now. The Company Law Board, had recently decided that the possession of the property will be handed over to the city-based Malhotra family. It had even appointed a retired judge to facilitate the possession. Sonica Malhotra, Director of the group, said, “We are awaiting an outcome of the matter and will proceed accordingly”. The hotel had been coming in the shape of a heritage building since its inception in 2007, but there has been little development after the first two years.
Malls in the pipeline
Lotus Bawa Mall When started: 2008 Expected completion: Not yet finalised A massive five floor mall-cum-multiplex, coming up in the posh Guru Teg Bahadur Nagar, had been lying pending for the past nearly six years owing to some issues of the owners of the Lotus Bawa group with a Dubai-based partner. Coming up in an area of 5.5 lakh sq feet, it had been planned to have a 4-screen cinema and a parking provision for 1000 cars. Owner of the site Atamjit Singh Bawa said, “We are roping in a new partner. We are yet to ink a pact for the same and cannot discuss the things at this stage. I will be able to share some development after a month’s time.” Asked if he was contemplating any changes in the old plan, he said, “Our new partner has suggested some minor changes. We will accordingly do the needful”. Curo High Street When started: July 10, 2011 Expected completion: By August, 2014 The Curo High Street is coming up in a 5-acre area on 66-feet road adjoining Urban Estate Phase-II. It will house a 5-screen PVR multiplex with Auchan Hypermarket, a separate food court with Costa Coffee, Pizza Hut, Dominos, Vango, McDonalds and KFC, an entertainment zone for kids and nearly 25 more brands of clothing, footwear and accessories. Kamal Soni, DGM Operations, said, “While the company is through with its own construction work, the brandstores are currently busy getting their own interior fittings done. The biggest attraction of the market is that it is low-rise and has multiplex and parking facility at the ground floor itself for the convenience of the visitors.” Miniplex When started: 2012 Expected completion: 1 year The same group is coming up with a Miniplex near its PPR Mall at Mithapur Chowk. “The two 100-seat cine halls that we are planning to construct will have luxurious dining facilities so that each customer can enjoy meals while watching movie,” said the owner Rajan Chopra.
price index jalandhar
Price in Rs /sq ft
New Jawahar Nagar 5-7 2000-4000
Source : Makaan.com
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Chic doors
Parushni Aggarwal There’s a saying that opportunity never knocks one’s door twice, but if your door is good then maybe opportunity would love to knock again! Modern doors provide homeowners an opportunity to make an individual statement with the entryway to their homes — doors have become a personal signature that can express the unique character and style of the home and those who live in it. A door is the first thing noticed by your guest and lends perceived value in their eyes about who lives inside, thus your front door is, in a way, a grand trailer of your property. Nowadays people don’t necessarily want a cookie-cutter front door. On the other hand door manufacturers are providing more options and configurations than ever, along with customised services that let you dial up your own personalised entry. To cater to the increased demand, there are countless varieties of doors available in the market — made from a wide range of materials and styles to suit almost any architectural style imaginable. Here are some of the latest door trends to help make your selection easier: Materials and trends
While wood remains the most popular material for doors, metal and fiberglass doors are also in vogue. Specially treated wood is being used by manufacturers to enhance their performance, durability and energy efficiency. A kiln-dried timber for example, allows the moisture content of the wood to be controlled more easily than air-dried timber, thereby increasing the lifespan of the wood in question. Treatments for wooden doors have also evolved — today, you can choose between solvent and water-based finishes that promise to increase the durability of the wood. Such finishes make the wood UV and water-resistant and include anti-fungal properties to aid in the prevention of dry rot and fungal attack. Wooden doors: A wooden door with graceful curves, distinctive grooves and elegant smooth finishes can add character and charm to any room in your new home. The latest trend is towards wooden doors that blend elements of historical design with modern functionality. Craftsman-inspired, hand-crafted, contemporary looks are more desirable over other traditional designs. Steel doors: Steel doors are probably the most popular replacement doors, for several reasons. The first, of course, is that they are the least expensive option (though premium models can cost nearly as much as a solid wooden door). The plus point of steel doors is that they are more durable, more secure than wood, and will never warp, twist or crack. However, for all their durability, steel doors are vulnerable to dents, and if the painted skin is breached by a scratch or severe dent, it can rust. However, avoid combining a steel door with a storm door as heat build-up between the doors can cause the surface to peel. Aluminum doors: These are relative newcomers in the market and share many of the same advantages as aluminum siding, including a baked-on enamel finish that never needs repainting and won’t rust. There are literally dozens of styles and colours available, including wood finishes. You can also combine an aluminum door with a storm door without fear of the hazards of heat build-up. The main drawback is that, like steel, aluminum can dent, and since they are usually built to order, aluminum doors are more expensive than steel. Glass doors: Glass is a renewable material and also easily available. New door trends seem to be including more and more glass in the entryway — front doors with oversized glass inserts, surrounding panels, decorative stained glass inserts, sidelights and transoms are becoming extremely popular due to their classic styling and the extra light they let into the home to create a spacious and airy look. The European Door style is the upcoming fashion trend to match the needs of a traditional home where glass panel and white décor could add an inviting
feel. —The writer is Owner and Creative Director, Studio Creo
Doors that are in
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Bulbous delight
Amarjeet batth ... A large part of the ‘flower bounty’ in home gardens these days comes courtesy bulbous plants. Various kinds of flower bulbs, irrespective of their origin, brighten home garden in a magical way in the subtropical climate of northern India when the colourful flowers bloom. These plants can be planted as annuals and provide seasonal delight. Bulbs like Amaryllis, Zephyranthes and Crinum remain evergreen while others like daffodils, gladiolus and iris become deciduous. Evergreen bulbs produce flowers more than once in this climate. Climate of this region is also favourable for the production of planting material of both temperate and tropical origin, including tubers of dahlia, bulbs of daffodils, corms of gladiolus, rhizome of canna and many others which can easily be produced here. The formation of flower in bulbs of daffodils, hyacinths, iris and tulip takes place during the storage after having been harvested in summer, while in the most tropical evergreen bulbs like crinum, tuberose and zephyranthes the formation of flower within the bulb, gets initiated when the bulb has made enough growth in size. It has been observed that the programmed bulbs of tulip, daffodils and hyacinthus when planted in September-October start blooming in February-March. Thereafter, they are lifted from the ground along with bulblets when the leaves have dried out in summer. The bulbs can be dried under shade for 4-6 weeks and transferred to cold storage at 4-6 degree centigrade temperature till the time of their next planting. Bulblets are grown in the next season. The tropical bulbs are usually maintained in the ground where they get into a clump with the formation of bulblets which are further used for production of flowering grade bulbs. If left as such, they may flower within the same season. Bulbs of tuberose planted in March produce flowers in May-June and again in Octber-November. Bulbs of amaryllis also behave in a similar manner. Crinum keeps on producing flowers from the culms from July to November Canna, is planted in February-March and produces flowers July onwards, while amaryllis planted in February-March flowers in April and October-November. Crinum planted in February-March flowers in July-September. Tuberose planted July onwards produces flowers once in May-June and then in October-November. Daffodils, hyacinths, iris tulip, freesia, gladiolus, Lilly Asiatic, Lilly Oriental, dahlia and ranunculus are planted September-October and flower in February- March. In the landscape bulbs with grass-like foliage (Ifafa lily, Jacobs lily) are best placed along pathways. |
Real estate law should cover small projects: Panel
A parliamentary panel has favoured the bringing of small projects within the purview of the Real Estate (Regulation and Development) Bill, 2013. The panel has said the law should be made applicable on constructions that are built on 100 sq m area or more.
In its report on the Bill, the Standing Committee on Urban Development said small projects had been excluded from the purview of the Bill where the area of land is less than 1000 sq m or where a building does not have more than 12 flats. The committee said the Bill provides that the threshold can be further lowered by the central government on recommendations of states or union territories. “The committee cannot but deplore this callous attitude of the ministry to leave such an important issue in the hands of the state governments,” the panel said. The committee expressed surprise why the Housing and Urban Poverty
(HUPA) ministry had not included a provision which would ensure that a construction execution certificate has to be issued. It said that as per the proposed legislation, a ‘model agreement’ has been provided. It said this provision should include a provision regarding the quality of materials and technology used in the construction. In another report brought out by the Standing Committee, the panel said the HUPA ministry had been silent on the issue of maintaining any data on the availability of night shelters. Stressing on the need to sort out this issue, the Committee said the possibility of making the scheme for urban homeless mandatory under National Urban Livelihood Mission
(NULM) should be explored. — PTI
Suggestions by the Standing Committee on Urban Development
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PICK OF THE WEEK Check out the exclusive range of curtains introduced by Siddharth by MKC, the designer label of Interior designer Monica Kamal. The brand offers an exclusive range of curtains and blinds this season in velvet, embossed velvet, silk, poly silk etc in beautiful tints and shades. Available in different colours like beige, off white, red, neutral color the range is detailed with cutwork, hand work and machine work. Price: On request.
Heavy duty floors
Laminate flooring company Pergo has launched its international range – Living Expressions. The new flooring solution has been built to meet the requirements of high traffic domestic areas. “The collection has been graded class 23/32, a grade which only reconfirms the durability and quality of the laminate flooring.
Scratch and stain resistant tiles
Check out the innovative range of floor tiles SSR — Scratch and Stain Resistant — launched recently by H&R Johnson (India). The SSR range is safe with optimum grip in wet conditions and comes with a protective shield that makes it skid resistant. Available in 600x600mm size the new collection can be used in the living, dining, balcony, kitchen, atriums, commercial space, passages, lobbies etc. and is best suited for high traffic areas in the premises. Price:
Rs 62 per sq ft
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Dip in sale volume plague realty firms
Sales volume of 25 listed real estate firms has dropped by almost half to nearly 12 million sq ft during the quarter ended December against the year-ago period due to slowdown in demand and high interest rates, according to global property consultant Knight Frank. The report also pointed out that construction activities have “log jammed” across India on liquidity crunch due to delay in approvals, high cost of funds and low demand. Despite a fall in sales volume, Knight Frank said, "the residential property prices across major cities have witnessed a double digit growth rate during fourth quarter of FY 2012- third quarter of FY 2014”. Commenting on the report, Knight Frank India Chief Economist and Director Research Samantak Das said, “Sales volume of 25 listed companies have almost halved due to poor sentiment, slow economic growth and high interest rates.” Sales volume stood at 11.8 million sq ft during October- December quarter of 2013-14 fiscal as compared to 20.73 million sq ft in the year-ago period. On regional basis, the maximum fall is in in North India. “Northern Indian is represented by seven companies in the set of 25 real estate companies and has plummeted the maximum sales volume to 57 per cent on a Y-o-Y basis in third quarter of FY 2014,” the survey said. Housing prices in the northern region have increased by 21 per cent during the last eight quarters. Sales volumes in the Western India declined by 36 per cent during October-December quarter of 2013-14 fiscal compared to same period of previous year. “Unaffordable prices and execution risk brought sales literally to a grinding halt in Western India. Average residential prices in the western region have increased by 16-17 per cent during the last eight quarters,” it added. However, sales in southern India increased by 4 per cent to the tune of 3.92 million square feet in Oct-Dec quarter of current fiscal against 3.76 million square feet in the same period last year. “Affordable prices, an end-user driven market and comparatively less leveraged balance sheets led to a relatively better performance by developers based in South India,” survey said. Knight Frank report is based on sales figures of 25 listed companies, out of which seven are from North, 13 from West and 5 from South. — Agencies |
REALITY BITES
To address the challenge of shortage of skilled workforce in construction sector, the Construction Skill Development Council of India (CSDCI) aims to train at least 3 lakh workers over next one year under a programme.
CSDCI, constituted under the National Skill Development Corporation, is promoted by Construction Federation of India, Builders’ Association of India, National Highways Builders Federation and Confederation of Real Estate Developers Association of India. “There is a severe shortage of skilled labour in the construction industry. We are working towards creating more and more competent people so as to ensure quality and compliance is delivered,” CSDCI chairman Ajit Gulabchand said. The Council has been set up with an aim to create occupational standards and competency levels for job roles as well as to issue guidelines and facilitate training and certificate of trainers and assessors. “We want to ensure that competency-based training is delivered through all training institutions in the country. We also want more and more such institutes to be set up to create skilled labour. To begin with, our aim is to train and certify nearly 3 lakh workers in the next one year,” he said. The Council has embarked on a plan to develop skills for the sector with six specific trades of mason, bar bender and fixer, scaffolder, carpenter, laboratory technician and assistant laboratory technician. “Every year the programme will scale-up adding new skills, ultimately taking to about 500 odd skills to be developed in the construction sector. We will set up training standards and facilitate training institutes across the nation,” Gulabchand said. CSDCI will work jointly with large private companies and institutions to devise industry-based curriculum, set training standards, offer good quality vocational training, and provide industry-endorsed certification.
Godrej Properties to develop housing project in Chennai
Godrej Properties Ltd (GPL) has entered into a partnership with SSPDL Green Acres LLP to develop a residential project in Chennai. The project will be developed through a profit-sharing model. “The proposed project, spread over 7 acres, will offer approximately 93,000 sq m of saleable area and will be developed as a modern group housing residential development comprising one, two and three bedroom apartments,” the company said in a statement. Speaking on this new partnership Godrej Properties MD and CEO Pirojsha Godrej in a said, “This new deal fits well with our strategy of adding quality residential projects across India’s leading real estate markets.” Project location offers excellent connectivity to all key areas in Chennai including the East Coast Road (ECR) and Grand Southern Trunk (GST) road and it will also benefit from the rapidly developing Information Technology zones surrounding it, the statement added. Meanwhile, yesterday also GPL has entered into a joint venture with two local firms to develop a premium housing project in Pune. GPL is developing housing, commercial and township projects spread across 94 million sq ft in 12 cities.
— PTI
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Can I claim tax rebate on capital gain?
S. C. Vasudeva Q. I have sold my personal property and used the capital gain to settle a dispute regarding an ancestral property by making the payment to my sisters so that the no objection certificate can be obtained to get the property transferred in my name. The settlement has been facilitated through Lok Adalat which has clearly specified the amount to be paid to each sister for the purpose. What will be my tax liability in this case as the major portion of the capital gain accrued shall be used in making the payment to my sisters and it will not be possible for me to make another long-term investment. — Arvinder Singh bindra A. According to the provisions of Section 45 of the Income Tax Act 1961 (The Act), any profit on the transfer of a capital asset is chargeable to tax under the head ‘Capital Gain’. Section 48 of the Act deals with the computation of the amount of capital gain which requires that income chargeable under the head ‘Capital Gain’ shall be computed by deducting from the full value of consideration received or accruing as a result of the transfer of the capital asset, expenditure incurred wholly and exclusively in connection with such transfer and the cost of acquisition of the asset and the cost of any improvement thereof. On the basis of the facts given in the query, any part of the amount of capital gain arising on the sale of your personal property utilised for payment to your sisters for betterment of your title to ancestral property would not be deductible from the amount of capital gain as the same cannot be termed as an expenditure incurred wholly and exclusively in connection with the sale of your personal property. You would, therefore, be liable to pay tax on the entire amount of capital gain arising on the sale of personal property in case you are not able to avail the benefit of exemption under Section 54/54F and/or 54EC of the Act.
Adjustment of loss
Q. My daughter owns two houses and she stays in and has let out the second house. The second house had been purchased with a loan from a bank and she is paying interest on the loan amount. During the first year she paid interest of ~3 lakh and got a rental income of ~1.50 lakh after providing for the annual maintenance. She has no other income chargeable under income tax. Hence during this year her net income was a minus income because of more interest paid. My query is whether she can carry forward the minus income or the loss in house income as generally called of this year to the next year? Again she will have minus income for the second year also as interest payable will be more than rental income in the initial years of loan period. If carrying forward the losses under house income is permitted how long this loss can be carried forward? Kindly clarify this point. —
Umesh Prasad
A. The loss arising under the head ‘income from house property’ can be adjusted against income under any other head of income of the relevant year. Such a loss can be carried forward for a period of eight years immediately succeeding the assessment year for which the loss was first computed for adjustment against the income from house property assessable for such assessment years.
What is meant by cost of acquisition?
Q. What would be the cost of acquisition of a property which is received as a gift or inherited by me? Will I be entitled to indexation benefit? —
Mohinder Kumar
A. Cost of acquisition of an asset is the value for which it was acquired by an assessee. Any amount of capital expenditure incurred for completing and acquiring the title to property is includible in the cost of acquisition. For example interest on money borrowed for construction or purchase of a capital asset would be includible in the cost of acquisition of an asset. In case a property is inherited by you or received as a gift from another person, cost to the previous owner will be deemed to be cost in your hands. You would be entitled to claim the indexation benefit. There is, however, a difference of opinion as to the date from which such indexation benefit would be allowable. The Income Tax Department is of the opinion that such benefit should be available to the successor or donee as the case may be, from the date he became the owner. However a few Income Tax Appellate Tribunals and High Courts have held that such benefit should be available from the date of acquisition by the original owner. It may, therefore, be possible for an assessee to claim the benefit of indexation from the original dates on the basis of such cases.
Tax liability on property without registry
Q. I had entered into a written agreement to purchase a house property from someone for a sum of Rs. 50 lakh. I have since paid the above amount and taken the possession of the house. The sale deed is yet to be registered in my favour. I have given the house property on rent. Am I liable to pay tax on the rent so received? —
Ravi Arora
A. In case a person has purchased a property by satisfying the following conditions, then he is considered to be a ‘deemed owner’ of such property: There is an agreement in writing between the buyer and the seller; The purchaser has paid the consideration; The purchaser has taken the possession of the property. Since you satisfy the above conditions, you have become a deemed owner. You are therefore liable to pay tax on the rent received from letting out the property.
Should I show my property in wealth tax return?
Q. I had made an agreement to sell my house property for Rs 50 lakh in January, 2014 and earnest money of
Rs 20 lakh has been received. The balance amount of Rs 30 lakh has also been received in March, 2014. I have handed over the possession to the buyer. The sale deed is yet to
be registered. Do I have to show this property in my wealth tax return? —Raj
Narain
A. A person who has taken possession of the property and satisfies the conditions laid down under Section 53A of the Transfer of Property Act 1882 is chargeable to wealth tax by virtue of the provisions of section 4(8) of the Wealth Tax Act 1957. Thus such property would be includable in the wealth of the buyer. You are , therefore, not liable to include such property in your wealth tax return. You would, however, be liable to pay tax on the amount of capital gain arising on the sale of such property unless you intend to avail the benefit allowable under Section 54 /54F and/or 54EC of the Act.
Property under litigation
Q. I purchased a house property in April, 2013 for a sum of ~60 lakh. I could not take the possession as the sale was questioned by vendor’s wife and litigation in respect thereof is pending and the matter is not likely to be decided before March 31, 2014. I have paid an advance of ~5 lakh. Am I supposed to include the above property in my wealth tax return, if so at what value? —
Ashutosh
A. The facts in the query indicate that you have not taken the possession of the property and have only agreed to purchase the same for an amount of ~60 lakh. Mysore High Court in the case of U.S. Nayak vs. Commissioner of Wealth Tax (68 ITR 171) has held that in case title of a property is not clear, the assessee may lose the property, if the suit was decided against the assessee and the wealth tax as paid may not be refundable to him are factors which are relevant for fixing the market value of such a property. Therefore, in the given case there being a disputed title and lack of possession will have to be taken into account for determining the market value as on the valuation date. In such a case the property should be valued in accordance with the residuary rule in Schedule III of Wealth-tax Act 1957 which provides that where a property cannot be valued in accordance with the specific rules, the market value shall be estimated to be the price which it would fetch if sold in the open market. It would be advisable to obtain a valuation certificate from an approved valuer for the market value of such property as on March 31, 2014 so as to steer clear of penalty provisions. Email your queries to
realestate@tribunemail.com
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Am I eligible to get loan?
S. C. Dhall ... Q. I am planning on buying a resale property in Chandigarh in a few months' time. I've been told by an acquaintance that it is very hard to get a home loan on a resale property as compared to that for a new purchase. How does a bank evaluate loan eligibility for such a buy? — Kavita Kalka A. You can get a home loan to buy a resale property and the age and valuation of the building will have a bearing on loan eligibility. Certain banks have restrictions based on the age of the property when the loan matures. Most banks give a maximum of 80 per cent of the property value as home loan. Also, banks get the property valued independently and the loan amount is based on this value. Often, the valuation as determined by the bank is significantly lower than the actual cost and, so, your effective down payment goes up. Q. I am planning to refinance my home loan as the rate of interest that I pay on my loan is higher than what is being offered currently. Will my current lender allow this or will I have to switch the bank? What are the factors to be considered in such a case? — Ashok Lamba A. As of April 2013, a competitive rate for a loan amount below Rs 30 lakh is between 9.95-10.25 per cent. So, check if your bank is willing to reduce the interest to a rate in this band, even if you have to pay a fee (about 0.56 per cent), to avoid the hassle of transferring documents. If the lender refuses, you can consider switching. RBI has already instructed banks not to charge a foreclosure fee for floating loans. However, you may have to pay some processing fee to the new lender, but most lenders agree to waive the processing fee. Q. I bought a flat for Rs 20 lakh, having paid Rs 8 lakh from my savings. I have a fixed deposit of Rs 10 lakh that will mature in August 2013. Should I use this money or take a home loan to pay the remaining amount on the flat? I earn about Rs 10.5 lakh annually. — Karam Chand A. You can consider both options based on how much each will cost you in the long term. Calculate the post-tax interest earned on your fixed deposit (FD) and post-tax cost on the home loan. Assuming you are in the 20 per cent tax bracket (based on the income mentioned) and the interest rate on FD to be 9.5 per cent, net post-tax yield is 7.6 per cent. Compare this with the cost of availing a home loan and the tax benefit on it. The net cost of borrowing might be lesser than the FD rate. If this is so, it is better to take a home loan. |